Economics Question – Market Equilibrium And Price Controls Mechanisms

Answer: TRUE/FALSE

1. Economic policies often have effects that their architects did not intend or anticipate.

2. Rent-control laws dictate a minimum rent that landlords may charge tenants.

3. Minimum-wage laws dictate the lowest wage that firms may pay workers.

4. Price controls are usually enacted when policymakers believe that the market price of a good or service is unfair to buyers or sellers.

5. Price controls can generate inequities.

6. Policymakers use taxes to raise revenue for public purposes and to influence market outcomes.

7. If a good or service is sold in a competitive market free of government regulation, then the price of the good or service adjusts to balance supply and demand.

8. At the equilibrium price, the quantity that buyers want to buy exactly equals the quantity that sellers want to sell.

9. A price ceiling is a legal minimum on the price at which a good or service can be sold.

10. A price ceiling set above the equilibrium price is not binding.

11. If a price ceiling is not binding, then it will have no effect on the market.

12. To be binding, a price ceiling must be set above the equilibrium price.

13. A price ceiling set below the equilibrium price is binding.

14. A price ceiling set below the equilibrium price causes quantity demanded to exceed quantity supplied.

15. A price ceiling set above the equilibrium price causes quantity demanded to exceed quantity supplied.

16. A binding price ceiling causes quantity demanded to be less than quantity supplied.

17. A price ceiling set below the equilibrium price causes a shortage in the market.

18. A price ceiling set above the equilibrium price causes a surplus in the market.

19. A binding price ceiling causes a shortage in the market.

20. When a binding price ceiling is imposed on a market for a good, some people who want to buy the good cannot do so.

21. Long lines and discrimination are examples of rationing methods that may naturally develop in response to a binding price ceiling.

22. Price ceilings are typically imposed to benefit buyers.

23. Binding price ceilings benefit consumers because they allow consumers to buy all the goods they demand at a lower price.

24. All buyers benefit from a binding price ceiling.

25. A binding price ceiling may not help all consumers, but it does not hurt any consumers.

26. When the government imposes a binding price ceiling on a competitive market, a surplus of the good arises, and sellers must ration the scarce goods among the large number of potential buyers.

27. The rationing mechanisms that develop under binding price ceilings are usually inefficient.

28. Price is the rationing mechanism in a free, competitive market.

29. Prices are inefficient rationing devices.

30. When free markets ration goods with prices, it is both efficient and impersonal.

31. When a free market for a good reaches equilibrium, anyone who is willing and able to pay the market price can buy the good.

32. If a price ceiling of $2 per gallon is imposed on gasoline, and the market equilibrium price is $1.50, then the price ceiling is a binding constraint on the market.

33. If a price ceiling of $1.50 per gallon is imposed on gasoline, and the market equilibrium price is $2, then the price ceiling is a binding constraint on the market.

34. A price ceiling caused the gasoline shortage of 1973 in the United States.

35. One common example of a price ceiling is rent control.

36. The goal of rent control is to help the poor by making housing more affordable.

37. Economists argue that rent control is a highly efficient way to help the poor raise their standard of living.

38. Because supply and demand are inelastic in the short run, the initial shortage caused by rent control is large.

39. The primary effect of rent control in the short run is to reduce rents.

40. The housing shortages caused by rent control are larger in the long run than in the short run because both the supply of housing and the demand for housing are more elastic in the long run.

41. The effects of rent control in the long run include lower rents and lower-quality housing.

42. Rent control may lead to lower rents for those who find housing, but the quality of the housing may also be lower.

43. In a free market, the price of housing adjusts to eliminate the shortages that give rise to undesirable landlord behavior.

44. A price floor is a legal minimum on the price at which a good or service can be sold.

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45. A price floor set above the equilibrium price is not binding.

46. If a price floor is not binding, then it will have no effect on the market.

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47. To be binding, a price floor must be set above the equilibrium price.

48. A price floor set below the equilibrium price is binding.

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49. A price floor set below the equilibrium price causes quantity supplied to exceed quantity demanded.

50. A price floor set above the equilibrium price causes quantity supplied to exceed quantity demanded.

51. A binding price floor causes quantity supplied to be less than quantity demanded.

52. A price floor set below the equilibrium price causes a surplus in the market.

53. A price floor set above the equilibrium price causes a surplus in the market.

54. A binding price floor causes a shortage in the market.

55. When a binding price floor is imposed on a market for a good, some people who want to sell the good cannot do so.

56. Discrimination is an example of a rationing mechanism that may naturally develop in response to a binding price floor.

57. Price floors are typically imposed to benefit buyers.

58. Binding price floors benefit sellers because they allow sellers to sell all the goods they want at a higher price.

59. Not all sellers benefit from a binding price floor.

60. A binding price floor may not help all sellers, but it does not hurt any sellers.

61. The rationing mechanisms that develop under binding price floors are usually efficient.

62. When a free market for a good reaches equilibrium, anyone who is willing and able to sell at the market price can sell the good.

63. If the equilibrium price of an airline ticket is $400 and the government imposes a price floor of $500 on airline tickets, then fewer airline tickets will be sold than at the market equilibrium.

64. If the equilibrium price of an airline ticket is $500 and the government imposes a price floor of $400 on airline tickets, then fewer airline tickets will be sold than at the market equilibrium.

65. One common example of a price floor is the minimum wage.

66. The goal of the minimum wage is to ensure workers a minimally adequate standard of living.

67. The United States is the only country in the world with minimum-wage laws.

68. States in the U.S. may mandate minimum wages above the federal level.

69. In the labor markets, workers determine the supply of labor and firms determine the demand.

70. In an unregulated labor market, the wage adjusts to balance labor supply and labor demand.

71. A binding minimum wage causes the quantity of labor demanded to exceed the quantity of labor supplied.

72. A binding minimum wage creates unemployment.

73. A binding minimum wage may not help all workers, but it does not hurt any workers.

74. A binding minimum wage raises the incomes of those workers who have jobs, but it lowers the incomes of workers who cannot find jobs.

75. The economy contains many labor markets for different types of workers.